Fucci et al v. Bowser et al

Filing 269

MEMORANDUM DECISION & Order: FA Defendants Objections 263 are Overruled and the Magistrate Judge's Memorandum and Order 258 is adopted as set forth above FA Defendants' Renewed Motion to Compel Arbitration 219 is Denied. Signed by Judge David Barlow on 05/08/2024. (kpf)

THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH
CHRISTPHER C. FUCCI, et al.,

MEMORANDUM DECISION AND
ORDER OVERRULING [263]
OBJECTION TO MAGISTRATE
JUDGE’S MEMORANDUM AND
ORDER DENYING RENEWED
MOTION TO COMPEL ARBITRATION

Plaintiffs,
v.
WILLIAM BOWSER, et al.,

Case No. 2:20-cv-00004-DBB-DAO
Defendants.
District Judge David Barlow

Before the court is First American Title Insurance Company and Kristen Parkin’s (“FA
Defendants”) Objection to the Magistrate Judge’s Memorandum and Order Denying FA
Defendants’ Renewed Motion to Compel Arbitration.1 The FA Defendants present seven
objections to the magistrate judge’s Memorandum and Order.
BACKGROUND
This matter concerns a commercial real estate investment gone wrong. Plaintiffs
purchased tenant-in-common interests in real estate development projects in Florida and Ohio.2
After their investments soured, Plaintiffs sued the seller of these interests, Rockwell Debt Free
Properties, Inc., and related parties (“Rockwell”).3 Plaintiffs also sought recovery from First

Obj. to Mag. Judge’s Oct. 2, 2023 Mem. & Order Den. First Am. Title Ins. Co. and Kirsten Parkin’s Renewed Mot.
to Compel Arb., ECF No. 263, filed Nov. 3, 2023 [hereinafter Obj.].
2
Am. Compl. ¶ 14, ECF No. 122, filed Aug. 17, 2021; Decl. of Steven J. Nielsen in Supp. of Renewed Mot. to
Compel Arb., ECF No. 220, filed Mar. 1, 2023 [hereinafter First Decl. Steven J. Nielsen].
3
Am. Compl. ¶¶ 12–13.
1

1

American Title Insurance Company (“First American”).4 First American served as escrow agent
and title insurer in closing each of the tenant-in-common sales.5 Each plaintiff transacted under
separate purchase sales agreements (“PSAs”), and Ms. Parkin acted as the escrow agent for every
transaction.6
Plaintiffs contend that the FA Defendants were entrusted with their invested money,
which would be held in escrow.7 Capital would only be disbursed for land purchases and for
incremental completion of event centers to be built on the properties.8 Plaintiffs allege that the
FA Defendants instead disbursed the entirety of the fund to Rockwell, which spent the money
and failed to complete any of the planned projects.9
The FA Defendants moved to compel Plaintiffs to arbitrate their claims under the Federal
Arbitration Act (“FAA”).10 However, the motion was dismissed without prejudice when the case
was stayed pending the appeal of a related issue in another case.11 After the stay was lifted, the
FA Defendants filed a renewed motion to compel arbitration on March 1, 2023.12 On March 29,
Plaintiffs filed their objection.13 On April 12, the FA Defendants filed their reply in addition to a

4

Id. ¶ 13. Plaintiffs allege that the FA Defendants improperly managed their escrow account, giving rise to six
claims in their Amended Complaint. These include breach of fiduciary duty, aiding and abetting tortious conduct,
conspiracy to engage in tortious conduct, materially aiding state-law securities fraud, unjust enrichment, and abuse
of vulnerable adults. Am. Compl. ¶¶ 86–89, 91–96, 106–111.
5
Id.
6
Id. ¶ 12.
7
Id. ¶¶ 129–30.
8
Id. ¶ 130; Mem. and Order Den. First Am. Title Ins. Co. and Kirsten Parkin’s Renewed Mot. to Compel Arb. and
Overruling Their Obj. to Evid. 4, ECF No. 258, filed Oct. 2, 2023 [hereinafter Order].
9
Am. Compl. ¶ 433(b).
10
FA Defs.’ Mot. to Compel Arb., ECF No. 126, filed Sept. 16, 2021.
11
Docket Text Order, ECF No. 149, entered Dec. 9, 2021. The other case is DiTucci v. Ashby, No. 2:19-cv-00277,
2021 WL 778579 (D. Utah March 1, 2021).
12
FA Defs.’ Renewed Mot. to Compel Arb., ECF No. 219, filed Mar. 1, 2023 [hereinafter Mot. to Compel Arb.].
13
Pls.’ Obj. to Renewed Mot. to Compel Arb., ECF No. 225, filed Mar. 29, 2023.

2

second Declaration of Steven J. Nielsen, and an objection to evidence presented in Plaintiffs’
objection.14
The magistrate judge held a hearing on the pending motion and objections on June 20,
2023.15 During the hearing, Plaintiffs’ counsel presented new evidence and legal authority to
support their argument relating to Ohio arbitration law.16 A “briefing odyssey” ensued.17 The
magistrate judge granted leave to the FA defendants to file a supplemental brief to respond to the
new information presented during the hearing.18 That brief was filed on June 27, 2023, which
added the new information to the record.19 Plaintiffs sought and obtained leave to file their own
supplemental response to FA Defendants’ brief.20 Without seeking leave, FA Defendants then
filed another supplemental brief and a fourth Steven J. Nielsen Declaration on July 19, 2023.21
Plaintiffs filed an evidentiary objection on July 26, 2023,22 and FA Defendants responded once
more on July 31, 2023.23 The parties’ supplementary filings concluded with the FA Defendants’
Notice of Supplementary Authority on September 12, 2023.24
On October 2, 2023, the magistrate judge entered the Memorandum Decision and Order
Denying FA Defendants’ Renewed Motion to Compel Arbitration (the “Order”).25 FA
FA Defs.’ Reply to Resp. to Mot. to Compel Arb., ECF No. 226, filed Apr. 12, 2023; Second Decl. Steven J.
Nielsen, ECF No. 227, filed April 12, 2023; Obj. to Evid., ECF No. 228, filed Apr. 12, 2023.
15
Minute Entry, ECF No. 243, entered June 20, 2023.
16
Pls.’ Resp. to FA Defs.’ Obj. to Mag. Judge’s Oct. 2, 2023 Mem. and Order 4, ECF No. 268, filed Dec. 22, 2023
[hereinafter Pls.’ Resp.].
17
Id.
18
Minute Entry, ECF No. 243, entered June 20, 2023.
19
FA Defs.’ Suppl. Brief in Supp. of Renewed Mot. to Compel Arb., ECF No. 244, filed June 27, 2023.
20
Pls.’ Supp. Resp. to Mot. to Compel Arb., ECF No. 250, filed July 12, 2023.
21
FA Defs.’ Resp. to Pls.’ Suppl. Mem. and Obj. to Evid., ECF No. 251, filed July 19, 2023; Decl. Steven J.
Nielsen, ECF No. 252, filed July 19, 2023 [hereinafter Fourth Decl. Steven J. Nielsen].
22
Pls.’ Obj. to Fourth Decl. of Steven J. Nielsen and Obj. to FA Defendants’ July 19, 2023 Resp., ECF No. 253,
filed July 26, 2023.
23
FA Defs.’ Resp. to Pls’ Objs., ECF No. 254, filed July 31, 2023.
24
FA Defs.’ Notice of Supp. Auth. ECF No. 255., filed Sept. 12, 2023.
25
Order 1.
14

3

Defendants objected to the Order on November 3, 2023.26 Plaintiffs filed their response on
December 22, 2023.27
STANDARD
Under Fed. R. Civ. P. 72, orders of a magistrate judge on non-dispositive matters are
reviewed based on a “clearly erroneous or contrary to law” standard, while dispositive matters
are reviewed de novo. FA Defendants argue that “the court should review the order de novo
because it is the functional equivalent of a dispositive motion expressly excepted under 28
U.S.C. § 636(b)(1)(A).”28 Courts in the Tenth Circuit have applied both standards on a motion to
compel arbitration.29 The court need not decide this issue because the result here is the same
under either standard.
DISCUSSION
The Federal Arbitration Act allows federal courts to enforce arbitration agreements.30 To
that end, courts may issue “an affirmative order to engage in arbitration.”31 In deciding a motion
to compel arbitration, a court must determine whether there is a valid agreement to arbitrate, and
whether the dispute in question falls within the scope of that agreement.32 Regarding whether
there is a valid agreement to arbitrate, courts utilize framework “similar to summary judgment

26

Obj.
Pls.’ Resp.
28
Obj. 4.
29
Judd v. KeyPoint Gov’t Sols., Inc., No. 18-cv-00327, 2018 WL 3526222, at *1 n.1 (D. Colo. July 23, 2018), R. &
R. adopted, 2018 WL 6603888 (D. Colo. Dec. 4, 2018); see also Smith v. AHS Okla. Heart, LLC, No. 11-CV-691,
2012 WL 3156878, at *1 n.1 (N.D. Okla. June 6, 2012), R. & R. adopted, 2012 WL 3156877 (N.D. Okla. Aug. 3,
2012) (citing Vernon v. Qwest Commc’ns Int’l, Inc., 857 F. Supp. 2d 1135, 1140–41 (D. Colo. 2012), aff’d, 925 F.
Supp. 2d 1185 (D. Colo. 2013)) (“The Tenth Circuit has not resolved the issue.”).
30
9 U.S.C. § 4.
31
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22 (1983).
32
AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650 (1986).
27

4

practice.”33 Where “the parties dispute the existence of an agreement to arbitrate, a court may
grant a motion to compel arbitration if ‘there are no genuine issues of material fact regarding the
parties’ agreement.’ Courts ‘should give to the opposing party the benefit of all reasonable
doubts and inferences that may arise.’”34 The moving party must present “evidence sufficient to
demonstrate the existence of an enforceable agreement.”35 If sufficient evidence of an
enforceable agreement is presented, the burden then shifts to the nonmoving party to “raise a
genuine dispute of material fact regarding the existence of an agreement.”36
Once it is determined that there is a valid agreement to arbitrate, a court must determine
whether the dispute in question falls within the scope of the agreement. When addressing
whether a dispute is arbitrable “any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration.”37
Under this framework, the Order denied FA Defendants’ Motion to Arbitrate. FA
Defendants do not object to the Order’s findings that the court has the authority to determine the
validity of the Arbitration Agreement and its enforceability on Plaintiffs.38 The parties also do
not dispute that the PSAs contain valid arbitration clauses.39 Their disagreements center on
whether the FA Defendants were parties to the agreement and, in the alternative, whether they

33

Hancock v. American Tel. & Tel. Co., Inc., 701 F.3d 1248, 1261 (10th Cir. 2012).
Id. (quoting Avedon Eng’g, Inc. v. Seatex, 126 F.3d 1279, 1283 (10th Cir. 1997); Par-Knit Mills, Inc. v.
Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980)).
35
Id.
36
Id.
37
Belnap v. Iasis Healthcare, 844 F.3d 1272, 1281 (10th Cir. 2017) (quoting Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983)).
38
Obj. 4–5.
39
Order 7.
34

5

can enforce the arbitration agreements as nonsignatories under equitable estoppel, agency, or
third-party beneficiary theories.40
I.

Whether the FA Defendants Were Parties to the PSAs.
FA Defendants first object to the magistrate judge’s conclusion that they are not parties to

the PSAs. The Order ruled that under Ohio and Florida law, the FA Defendants were not
“parties” under the plain language of the sales agreements.41
FA Defendants contend that they are parties to the arbitration agreement despite the fact
they did not sign the PSAs. They instead argue that both Ohio and Florida law provide “that a
nonsignatory is deemed a party to a contract so long as the signatory assents to its obligations
under the contract.”42 Thus, FA Defendants contend that Plaintiffs and the Rockwell defendants
assented to an agreement to allow FA Defendants to arbitrate any disputes under the PSA. In
doing so, they point to the text of the arbitration clause. It encompasses “[a]ny dispute between
the parties.”43 FA Defendants reason that because Black’s Law Dictionary defines “party” as
“someone who takes part in a transaction,” the Rockwell Defendants and the Plaintiffs intended
that the FA Defendants were included in the meaning of the term “parties” in the arbitration
clause because of their role in the sale.44 This includes acting as the escrow agent and by insuring
each Plaintiff in the amount of the purchase price. Thus, under their theory, the FA Defendants
can compel Plaintiffs to arbitrate because the PSAs “contemplated that the FA Defendants would
participate in the transactions.”45

40

Obj. 5–14.
Order 9–11.
42
Obj. 5.
43
E.g., First Decl. Steven J. Nielsen Ex. 27 ¶ 9.
44
Id.
45
Obj. 6.
41

6

The Supreme Court has held that “arbitration is a matter of contract, and a party cannot
be required to submit to arbitration any dispute which he [or she] has not agreed so to submit.”46
This is because “arbitrators derive their authority to resolve disputes only because the parties
have agreed in advance to submit such grievances to arbitration.”47 If there is a question as to
whether a party did not agree to submit to arbitration, state contract law controls. This is because
the Federal Arbitration Act “does not alter background principles of state contract law regarding
the scope of agreements . . . including the question of who is bound by them.”48
State law applies here because the parties raise an issue regarding whether the Plaintiffs
agreed to arbitrate with the FA Defendants.49 Each of the PSAs contains a choice of law
provision that specifies which state’s law governs their construction. The PSAs for the Ohio
Properties are governed by Ohio law,50 and the PSAs for the Florida Property are governed by
Florida law.51
A. Ohio Law
Under Ohio law, signatures are not required to enforce or be bound by arbitration
contracts.52 “It is only necessary that the provision be in writing and it is not required that such
writing be signed.”53 Ohio courts have held that an arbitration clause in a contract is enforceable
regardless of whether the party seeking to compel arbitration signed the agreement.54

AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986) (quotation and citation omitted).
Id.
48
Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 630 (2009).
49
See, e.g., Pls.’ Resp. 4.
50
E.g., First Decl. Steven J. Nielsen Ex. 27 ¶ 18.
51
E.g., First Decl. Steven J. Nielsen Ex. 25 ¶ 18.
52
Brumm v. McDonald & Co. Securities, 603 N.E.2d 1141, 1145–46 (Ohio Ct. App. 1992).
53
Id.
54
See, e.g., Id.; Ross v. Bridgewarter Contsr. Inc., 2003 WL 22736578, at *2 (Ohio Ct. App. Nov. 21, 2003).
46
47

7

“Arbitration is a matter of contract and a party cannot be required to submit a dispute to
arbitration when it has not agreed to do so. Therefore, a court is required to ‘look first to whether
the parties agreed to arbitrate a dispute, not to general policy goals to determine the scope of the
agreement.’”55
“A valid and enforceable contract requires an offer by one party and an acceptance of the
offer by another party.”56 Offer and acceptance requires a meeting of the minds.57 “In order for a
meeting of the minds to occur, both parties to an agreement must mutually assent to the
substance of the exchange.”58
Here, the issue centers on whether a meeting of the minds occurred between the three
groups of individuals, the Rockwell Defendants, the FA Defendants, and the Plaintiffs. In order
for the FA Defendants to enforce the arbitration agreement under the PSAs, there must be some
manifestation that the relevant individuals and entities agreed to arbitrate any disputes stemming
from the PSAs. This is a question of contract interpretation.
Under Ohio law regarding the interpretation of contracts, it is the court’s role “to give
effect to the intent of the parties to the agreement.”59 Intent is presumed to reside in the agreed
upon contractual language.60 “Common words will be given their ordinary meaning unless
manifest absurdity results or unless some other meaning is clearly evidenced from the face or
overall content of the contract. If the language in a contract is clear and unambiguous, the court

55

One Lifestyle, Ltd. v. Mohiuddin, 172 N.E.3d 507, 513 (Ohio Ct. App. 2021) (quoting EEOC v. Waffle House,
Inc., 534 U.S. 279, 294 (2002)).
56
Mohiuddin, 172 N.E.3d at 513.
57
Id.
58
Id. (citations omitted).
59
Kellie Auto Sales, Inc. v. Rahbars & Ritters Ents., L.L.C., 876 N.E.2d 1014, 1019 (Ohio Ct. App. 2007).
60
Id. (citing Alexander v. Buckeye Pipe Line Co., 374 N.E.2d 146 (Ohio 1978).

8

cannot create a new contract by finding an intent not expressed in the clear language employed
by the parties.”61
Here, the text of the PSAs does not support a finding that there was a meeting of the
minds between the three groups of individuals and entities that the FA Defendants agreed to
arbitrate. The signature block states that the “parties have set their hands” to the document, and
the only signers are the Rockwell Seller and Plaintiff Buyer.62 The agreements also state that
they are “made . . . by and between” each seller and buyer with no mention of any other parties.63
The terms “buyer” and “seller” consistently refer exclusively to Rockwell and each Plaintiff
throughout the PSAs.64 Thus, the plain text of the agreement is clear that only the Rockwell
entities and each individual plaintiff agreed to arbitrate disputes under the PSA. This finding is
consistent with FA Defendants’ own argument in another filing before the court where they
argued that they were not parties to the PSAs.65
FA Defendants further object that because the “FA Defendants were an integral part of
the transactions under the PSAs,” the parties must have intended to arbitrate. They point to
several instances where the PSAs delegated “specific and exclusive duties” to First American as
evidence that they “manifested their intent to be bound as a party to the PSAs.”66 However, none
of these obligations delegated to First American indicate that they also intended to arbitrate.

61

Id. (citing Alexander v. Buckeye Pipe Line Co., 374 N.E.2d 146 (Ohio 1978).
E.g., First Decl. Steven J. Nielsen Ex. 1, at 9. The Seller in this contract is Rockwell Dublin, a Utah limited
liability company.
63
E.g., id. at 3.
64
See First Decl. Steven J. Nielsen.
65
FA Defs.’ Reply in Supp. of Mot. to Dismiss 4 n.6, 5, ECF No. 58, filed May 20, 2020.
66
Obj. 5. FA Defendants point to paragraphs 2.2, 3.2, 3.4, and 3.5 of the PSAs.
62

9

Indeed, the court cannot look to general policy goals, such as the parties’ alleged implied
intent to bind First American to the arbitration clause, to override the plain language of the PSAs.
However “integral” First American’s role was in the transactions, the fact remains that the text
makes clear that First American was not a “party” to the PSAs. The court also similarly rejects
the notion that the court may look to extrinsic sources, such as Black’s Law Dictionary or a title
insurance treatise, to change the clear intent of the parties to the PSAs.
The text of the PSAs does not indicate that the FA Defendants were “parties” to the
agreement. Accordingly, they are not entitled to compel arbitration under this theory.
B. Florida Law
Under Florida law, “[a]rbitration clauses are construed according to basic contract
interpretation principles.”67 “An obligation to arbitrate is based on consent, ‘and for this reason a
non-signatory to a contract containing an arbitration agreement ordinarily cannot compel a
signatory to submit to arbitration.’”68 “The plain language of the agreement containing the
arbitration clause is the best evidence of the parties’ intent. The arbitration clause must be read
together with other provisions in the contract.”69
Thus, because the analysis again focuses on the plain language of the PSAs, the result is
the same under Florida law as it is under Ohio law. As noted above, the plain language of the
PSAs does not indicate that there was a meeting of the minds that the parties to the agreements
agreed to arbitrate disputes with the FA Defendants.

67

Bari Builders, Inc. v. Hovstone Props. Fla., LLC, 155 So. 3d 1160, 1162 (Fla. Dist. Ct. App. 2014) (citing Seifert
v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999)).
68
Marcus v. Florida Bagels, 112 So. 3d 631, 633 (Fla. Dist. Ct. App. 2013) (quoting Roman v. Atl. Coast Constr. &
Dev., Inc., 44 So. 3d 631, 633 (Fla. Dist. Ct. App. 2010)).
69
Bari Builders, 115 So. 3d at 1162.

10

II.

Whether the FA Defendants Were Third Party Beneficiaries of the PSAs
FA Defendants argue that they can compel arbitration because they were third-party

beneficiaries of the agreements. They contend that this court should follow the reasoning in a
recent Utah appellate decision, First American Title Insurance Company v. Barron.70 FA
Defendants correctly point out that Barron applied Colorado law, not Ohio or Florida law. It thus
has little bearing here.71
FA Defendants further contend that the analysis in Barron applies here because Ohio and
Florida courts have similar standing requirements for a third-party beneficiary to those the Utah
court of appeals found to apply under Colorado law.72 This is too attenuated. Ohio and Florida
courts hold that a third party must have something more than an incidental or inconsequential
benefit from the contract. FA Defendants conclude that the PSAs clearly benefitted First
American because the PSAs designated it as the escrow agent and issuer of the title policies.73
The court first notes that review of a magistrate judge’s decision is compelled when a
timely objection is filed, but “issues raised for the first time in objections to a magistrate judge’s
recommendation are deemed waived.”74 Plaintiffs first raised the issue of third-party beneficiary
status in their objection to FA Defendants’ Motion to Compel Arbitration. They stated that “FA
does not directly assert that it is a third-party beneficiary of the PSA, and certainly there is no

70

540 P.3d 623 (Utah Ct. App. 2023).
As stated before, state law is applicable here because the Tenth Circuit has held that the issue of whether a nonsignatory can compel arbitration under an arbitration agreement is governed by state law. Belnap v. Iasis
Healthcare, 844 F.3d 1272, 1293 (10th Cir. 2018) (citing Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 630–31
(2009).
72
Obj. 6. FA Defendants quote a holding from Barron and ask the court to compare that holding to similar holdings
in Ohio and Florida cases, Huff v. FirstEnergy Corp., 957 N.E.2d 3, 7 (Ohio 2011) and Germann v. Age Inst. of Fla.,
Inc., 912 So. 2d 590, 592 (Fla. Dist. Ct. App. 2005).
73
Mot. to Compel Arb. 9.
74
Marshall v. Chater, 75 F.3d 1421, 1426 (10th Cir. 1996).
71

11

serious argument that they could be.”75 In their reply, FA Defendants failed to respond to the
allegation that they did “not directly assert that [they] are a third-party beneficiary.”76 The court
notes that this argument was likely waived. Regardless, the court addresses the substance of this
argument.
Under Florida law, the party claiming third-party beneficiary status bears the burden of
demonstrating that it was a beneficiary of the contract.77 The party must demonstrate that it
received something more than “an incidental or inconsequential benefit from the contract.”78
This is apparent “only if the parties to the contract clearly express, or the contract itself
expresses, an intent to primarily and directly benefit the third party . . . .”79
Similarly, Ohio law also requires that a party must demonstrate that a “contract was
entered into directly or primarily for the benefit of that person.”80 “If the promisee intends that a
third-party should benefit from the contract, then that third party is an ‘intended beneficiary’ who
has enforceable rights under the contract.”81 “If the promisee demonstrates no intent to benefit a
third party, then any third party beneficiary to the contract is merely an ‘incidental beneficiary,’
who has no enforceable rights under the contract.”82 “The mere conferring of some benefit on the
supposed beneficiary by the performance of a particular promise in a contract is insufficient;

Pls.’ Obj. to Renewed Mot. to Compel Arb., ECF No. 225, filed Mar. 29, 2023.
See FA Defs.’ Reply to Resp. to Mot. to Compel Arb., ECF No. 226, filed Apr. 12, 2023.
77
Williams v. Tony, 319 So. 3d 653, 657 (Fla. Dist. Ct. App. 2021).
78
Id. (quoting Caretta Trucking, Inc. v. Cheoy Lee Shipyards, Ltd., 647 So. 2d 1028, 1030–31 (Fla. Dist. Ct. App.
1994)).
79
Id. (quoting Caretta Trucking, 647 So. 2d at 1031).
80
Caruso v. Natl. City Mtge. Co., 931 N.E.2d 1167, 1171–72 (Ohio Ct. App. 2010).
81
Hill v. Sonitrol of Sw. Ohio, Inc., 521 N.E.2d 780, 784 (Ohio 1988) (quoting Norfolk & W. Co. v. United States,
641 F.2d 1201, 1208 (6th Cir. 1980).
82
Id. at 784–85.
75
76

12

rather, the performance of that promise must also satisfy a duty owed by the promisee to the
beneficiary.”83
The analysis is the same under Ohio or Florida law.84 Under both states’ law, courts look
first to the terms of the contract at issue to determine whether a party is an intended third-party
beneficiary.85 The PSAs only reference First American four times. The first reference states that
“the balance of the purchase price shall be wired . . . to First American Title Company within
twenty-four hours of closing.”86 The next three references only apply “in the event the Buyer
desires to . . . [pay] any portion of the Purchase price . . . with funds Buyer desires to qualify as a
1031 Exchange” under Section 1031 of the I.R.S. Code of 1986.87
References to First American in the PSAs do not establish that the parties owed a duty to
the FA Defendants. For example, the parties’ agreement that “the balance of the purchase price”
was to be transferred to First American does not indicate that the performance of that provision
satisfied a duty owed to First American. Regarding the other references in the agreements to First
American, a plaintiff’s option to utilize a 1031 Exchange does not demonstrate intent to benefit
First American at all, much less “primarily and directly.” Moreover, the PSAs do not state
whether or how much First American should be compensated. Because the PSAs do not establish

83

Id. at 85.
See Huff v. FirstEnergy Corp., 957 N.E.2d, 3, 7 (Ohio 2011); Williams, 319 So. 3d at 657.
85
See Huff v. FirstEnergy Corp., 957 N.E.2d, 3, 7 (Ohio 2011); Williams, 319 So. 3d at 657.
86
First Decl. Steven J. Nielsen, Ex. 1, ¶ 2.2.
87
Id. ¶ 3. If the buyer chooses to pay with 1031 funds, the PSAs state that the “Eastern 1031 Starker Exchange”
should periodically transfer the 1031 funds to First American Title Company, who then is required to apply the
funds either towards the purchase of an undivided interest in the property or the construction of improvements on
the property on a reimbursement basis. Id. ¶ 3.2. The Seller (Rockwell) has the duty to provide statements to First
American to provide statements indicating the costs for which it should be reimbursed. Id.
84

13

that First American was owed any duties by the signatories, Defendants failed to demonstrate
that they are third-party beneficiaries under either state’s law.
III.

Enforceability of the Arbitration Provisions under FA Defendants’ Agents of
Rockwell Theory88
FA Defendants object to the magistrate judge’s determination that they are not agents of

Rockwell under Ohio or Florida law.89 Under Ohio law “[a]n agency relationship is created when
a principal has the right to control the actions of its agent, and when the agent’s actions are in
furtherance of an objective that the principal seeks.”90 “The basic test is whether the principal has
the right of control over the manner and means of the work being done.”91 Similarly, Florida law
provides that “‘[e]ssential to the existence of an actual agency relationship is (1)
acknowledgment by the principal that the agent will act for him, (2) the agent’s acceptance of the
undertaking, and (3) control by the principal over the actions of the agent.’”92 In Florida too,
“[w]hen one considers an action based on actual agency, it is the right to control, rather than
actual control, that may be determinative.”93
As the magistrate judge noted, Plaintiffs’ description of FA Defendants as being the
“escrow agent” or “closing agent” describes FA Defendants’ role in the transaction, not the legal
status of a common-law agent. “An escrow holder is not a common-law agent because the holder
does not act subject to the control of the parties to the escrow agreement.”94 Here, the PSAs do
88

FA Defendants assert their equitable estoppel argument as their third objection, then their agency theory objection
fourth, and the waiver issue fifth. The court responds to the objections out of the order presented to simplify the
analysis. The court addresses the agency objection, then waiver, and then equitable estoppel.
89
Obj. 9.
90
Wells v. Komatsu Am. Int’l Co., 835 N.E.2d 771, 776 (Ohio Ct. App. 2005) (citing Hansen v. Kynast, 494 N.E.3d
171, 173 (Ohio 1986).
91
Id. (citation omitted).
92
Goldschmidt v. Holman, 5 71 So.2d 422, 424 (Fla. 1990) (quoting Restatement (Second) of Agency § 1 (1957)).
93
Villazon v. Prudential Health care Plan, Inc., 843 So.2d 842, 852 (Fla. 2003).
94
Escrow Agent, Black’s Law Dictionary (11th ed. 2019).

14

not provide for either party having the right to control the FA Defendants. Because the FA
Defendants have not shown that Rockwell had the right to control the FA Defendants, they have
not established an agency relationship under Ohio or Florida law.
IV.

Reliance on Rockwell’s Purported Waiver of Arbitration Clause
FA Defendants object to the magistrate judge’s finding that Rockwell’s Chapter 7 trustee

waived the Rockwell Defendants’ arbitration rights in the PSAs. They contend that the
magistrate judge improperly relied on the trustee’s letter and “ignored” their briefing explaining
that (1) the trustee lacked power to waive the arbitration clause, (2) the waiver did not comply
with the modification clause in the PSAs, and (3) Rockwell could not waive the FA Defendants’
rights after they accrued.95 These objections lack clarity—parties are obligated to identify the
specific reasons why they object to a magistrate judge’s order.96
Objections to a magistrate judge’s order must be both timely and specific.97 An objection
is sufficiently specific if it “enables the district judge to focus attention on those issues—factual
and legal—that are at the heart of the dispute.”98 Without further explanation, FA Defendants
conclusorily assert that the magistrate judge ignored their briefing which argued that “[t]he
trustee lacked power to waive the arbitration clause because it did so without Bankruptcy Court
participation.”99 They support their assertion with a footnote citation to a Colorado bankruptcy
court case.100 The court assumes that the FA Defendants object to the magistrate court’s finding

95

Obj. 10.
A request for “the district court to reconsider the magistrate’s report and recommendation based on the
[filings] . . . [already] submitted to the court” is an insufficient objection. One Parcel, 73 F.3d at 1060.
97
United States v. One Parcel of Real Property Known as 2121 E. 30th St., 73 F.3d 1057, 1059 (10th Cir. 1996).
98
Id.
99
Obj. 10.
100
Obj. 10 (citing In re Stemwedel, No. 11-39196, 2018 Bankr. LEXIS 3083 at 10 (Bankr. D. Colo. Sept. 27, 2018,
aff’d, Stemwedel v. Peak Props & Dev., 2019 LEXIS 159795 (D. Colo. Sept. 19, 2019)).
96

15

that the bankruptcy trustees had authority to waive the signatories’ arbitration rights, thereby
rejecting FA Defendants’ argument that section 363 of the bankruptcy code denied the trustees
the ability to waive arbitration rights.101
As explained by the magistrate judge, 11 U.S.C. § 363(b)(1) requires that bankruptcy
trustees may not “deal with the property of the estate” unless formal notice and an opportunity
for a hearing before the bankruptcy court are provided. FA Defendants argued in their reply
briefing to their Motion to Compel Arbitration that arbitration rights are “property of the estate”
and that formal notice and an opportunity for a hearing were required before the trustees waived
them.102 The magistrate judge noted that FA Defendants did not provide any authority supporting
the assertion that arbitration rights are “property of the estate,” nor did they address the factors
used to determine what constitutes “property of the estate” under § 363(b)(1).103 FA Defendants
failed to address this flaw in reiterating the same argument in their objection.104
Next, FA Defendants assert that the PSAs required modifications be made “in writing and
signed by the parties.”105 Because this issue deals with the scope of the contract enforced by a
non-party, “traditional principles of state law” govern the issue.106 However, FA Defendants
101

Order 18.
FA Defs.’ Reply to Resp. to Mot. to Compel Arb 1, ECF No. 226, filed April 12, 2023.
103
Order 18. The magistrate judge further explained that 11 U.S.C. § 541(a)(1) defines property of the estate as “all
legal or equitable interests of the debtor in property as of the commencement of the case.” Order 18 n.82 (citing
Colbert v. Littman (In re Wagenknecht), 971 F.3d 1209, 1213 (10th Cir. 2020) (stating “property interests are
created and defined by state law” but informed by federal bankruptcy law, and identifying “two tests to determine
whether a debtor has legal or equitable interests in the transferred property” (internal quotation marks omitted)).
104
Moreover, the authority FA Defendants cited in making their objection does not address the waiver of arbitration
rights as being “property of the estate.” See Obj. 10 n.13 (citing In re Stemwedel, 2018 Bankr. LEXIS 3082 (Bankr.
D. Utah Sept. 27, 2018)).
105
Obj. 10.
106
Arthur Anderson, 129 U.S. at 631. Under Ohio law, waiver is considered under a totality of the circumstances test
to determine whether the waiving party acted inconsistently with a known right to arbitrate. Crosscut Capital, LLC
v. DeWitt, 173 N.E.3d 536, 540 (Ohio Ct. App. 2021). A court considers “(1) whether the party seeking arbitration
invoked the court’s jurisdiction by filing a complaint or claim without first requesting a stay; (2) the delay, if any, by
the party seeking arbitration to request a stay; (3) the extent to which the party seeking arbitration has participated in
102

16

failed to provide any legal authority on the issue. Additionally, they failed to demonstrate how
they could enforce a contractual right as a non-party—especially when the parties waived their
arbitration rights in bankruptcy court.107
Lastly, FA Defendants contend that Rockwell lacked the ability to waive FA Defendants’
arbitration rights after they “accrued.”108 In doing so, FA Defendants cite only to an unreported
Northern District of Georgia decision applying “general principles of third-party beneficiary
law” rather than Ohio or Florida law.109 As explained previously, state law governs this issue.110
Regardless, FA Defendants have failed to show that they had any rights to arbitration under the
PSAs, much less rights that had “accrued.”
V.

Enforceability of the Arbitration Provisions under Equitable Estoppel
Defendants next object to the Order’s conclusion that the FA Defendants “f[e]ll outside

the intended and explicit reach of the arbitration clauses,” precluding them from relying on
principles of equitable estoppel to compel arbitration.111 Both Ohio and Florida law allow a
signatory to be estopped from “avoiding arbitration with a nonsignatory when the issues the
nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the
estopped party has signed.”112

the litigation; and (4) whether prior inconsistent acts by the party seeking arbitration would prejudice the nonmoving party.” Morris v. Morris, 939 N.E.2d 928, 937 (Ohio Ct. App. 2010). Similarly, under Florida law, “the
essential question is whether, under the totality of the circumstances, the defaulting party has acted inconsistently
with the arbitration right.” Raymond James Fin. Servs., Inc. v. Saldukas, 896 So. 2d 701, 711 (Fla. 2005).
107
Response to Motion to Compel Ex. A, ECF No. 225, filed March 29, 2023.
108
Obj. 10.
109
Regions Bank v. Chattanooga-Hamilton Cnty. Hosp. Auth., 2014 WL 12621478, at *18 (N.D. Ga. 2014) (citing
Manning v. Wiscombe, 498 F.2d 1311, 1313 (10th Cir. 1974)).
110
Arthur Anderson, 129 U.S. at 631.
111
Obj. 7 (quoting Order at 12).
112
I Sports v. IMG Worldwide, Inc., 813 N.E.2d 4, 8 (Ohio Ct. App. 2004); see Greene v. Johnson, 276 So .3d 527,
531 (Fla. Dist. Ct. App. 2019) (“the doctrine of equitable estoppel on the basis of intertwined claims . . . applies

17

A.

Ohio Law

Under Ohio law, “[a]rbitration agreements apply to nonsignatories only in rare
circumstances.”113 A signatory may be estopped from “avoiding arbitration with a nonsignatory
when the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the
agreement that the estopped party has signed.”114 There are two instances where equitable
estoppel may be applied involving “intertwined claims.”115 First, a nonsignatory can compel
arbitration if the “signatory must rely on the terms of the written agreement in asserting claims
against a nonsignatory.”116 Second, equitable estoppel binds a signatory to an arbitration clause if
“the signatory alleges substantially interdependent and concerted misconduct by both the
nonsignatory and one or more signatories to the contract.”117 The court addresses whether either
form of intertwined claims estoppel may apply here.
1.

Intertwined Claims: Reliance on Terms of Agreement

Under the first form, which requires a finding that the signatory relies on terms of the
agreement in question in asserting claims against the nonsignatory, “[t]he test is whether the . . .
[non-consenting litigant] has asserted claims that arise from the contract containing the
arbitration clause.”118 Where the non-consenting party asserts claims against the arbitrationseeking party that arise from the contract containing the arbitration clause, that non-consenting

when a signatory to a contract containing the arbitration clause raises allegations of interdependent and concerted
misconduct by both a non-signatory and one or more of the signatories to the agreement.”).
113
I Sports v. IMG Worldwide, Inc., 813 N.E.2d 4, 8 (Ohio Ct. App. 2004).
114
Id. (quoting Thomsom-CSF, S.A. v. American Arb. Ass’n, 64 F.3d 773, 770 (Ohio Ct. App. 1995).
115
I Sports, 813 N.E.2d at 8.
116
Id.
117
Id.
118
Taylor v. Ernst & Young, L.L.P., 958 N.E.2d 1203, 1213 (Ohio 2011); see Atricure, Inc. v. Meng, 12 F.4th 516,
527 (6th Cir. 2021) (applying Ohio law and reasoning that “estoppel exists to compel a nonconsenting litigant to the
arbitration table because of its inconsistent positions about whether the contract’s other terms apply as between the
two litigants.”).

18

party may not inconsistently invoke contractual terms, claiming that one term governs the
relationship while the arbitration clause does not.119 Ohio courts apply the “arising from the
contract” test strictly. “[I]t is not sufficient that the plaintiff’s claims ‘touch matters’ concerning
the agreement or that the claims are ‘dependent upon’ the agreement.”120 And “even if a
noncontract claim . . . depends on a showing of a breach of contract,” Ohio courts will often
reject estoppel claims.121
Put simply, the key to the analysis is identifying the basis of the non-consenting parties’
claims against the parties seeking to compel arbitration. And under Ohio law, Plaintiffs must rely
on the terms of the contract containing the arbitration clause in asserting claims against the FA
Defendants.122 Defendants point to Paragraph 412 of the Complaint, which pertains to Plaintiffs’
claim that the FA Defendants breached their fiduciary duty regarding their escrowed funds.123
First, some context is needed. The relevant section of the Complaint begins by
establishing the basis of First American’s fiduciary obligations. Paragraph 408 avers that
“Plaintiffs were not provided with a separate escrow agreement,” but the FA Defendants still had
specific fiduciary obligations for various reasons.124 The first reason listed: FA Defendants had
obligations to Plaintiffs who “carr[ied] out a 1031 Exchange” as “expressly provided” by the
PSAs.125 The other reasons provided also deal with First American’s role in executing the 1031

119

Id.
I Sports, 813 N.E.2d at 9 (quoting Hill v. G.E. Power Sys., Inc., 282 F.3d 343, 348 (5th Cir. 2002)).
121
Atricure, Inc. v. Meng, 12 F.4th 516, 527 (6th Cir. 2021) (citing Church v. Fleishour Homes, Inc., 874 N.E.2d
795, 806–07 (Ohio Ct. App. 2007).
122
I Sports, 813 N.E.2d, at 8 (“a signatory must rely on the terms of the written agreement in asserting claims
against a nonsignatory.”).
123
Obj. 8.
124
Am. Compl. ¶ 408.
125
Am. Compl. ¶ 408(a).
120

19

Exchange obligations.126 For example, paragraph 408(d) explains that their failure to comply
with applicable 1031 Exchange rules “would subject Plaintiffs to risk that their funds would be
misappropriated, diverted, or converted from the [intended] purpose.”127
Paragraph 412 of the Complaint alleges the various ways that the FA Defendants
breached their fiduciary duty. Plaintiffs aver that FA Defendants “fail[ed] to provide or require a
written escrow agreement,” “fail[ed] to communicate to Plaintiffs that their payment of the TIC
Investment would be immediately disbursed,” “disburs[ed] funds from the escrow at the request
of Rockwell without ensuring that the funds would be used in connection with the intended TIC
property,” “fail[ed] to follow the express requirements of the Purchase and Sale Agreement
between Rockwell and the TIC Owners . . . including . . . paragraph 3.2, “disburs[ed] the escrow
funds to Rockwell without any agreement or consent of the Plaintiffs,” and “[o]therwise fail[ed]
to exercise due care and loyalty to safeguard Plaintiff’s funds.”128
In short, Plaintiffs allege two bases for the duties FA Defendants’ owed to them. First,
they allege that FA Defendants’ fiduciary duties stem from their role as an escrow agent, the
specifics of which were established in non-PSA agreements. Second, Plaintiffs contend that the
PSAs specify certain fiduciary duties regarding 1031 Exchange funds.129 The claims, however,
arise from alleged tortious conduct—the breach of fiduciary duties owed to Plaintiffs. Plaintiffs
do not assert breach of contract claims against FA Defendants.130 And to the extent the existence

126

Am. Compl. ¶¶ 408(b)–(d).
Am. Compl. ¶ 408(d).
128
Am. Compl. ¶ 412.
129
Am. Compl. ¶ 408(b), (d).
130
See I Sports v. IMG Worldwide, Inc., 813 N.E.2d. 4, 10 (Ct. App. Ohio 2004).
127

20

of some specific fiduciary duties may be dependent on terms in the PSAs, Plaintiffs’ claims seek
to enforce duties established in tort law, not contractual rights or obligations.
Regarding the 1031 Exchange provisions in the PSAs, these appear to overlap with what
is already required by law. As Plaintiffs allege, an element of Rockwell’s investment scheme was
the successful implementation of 1031 Exchanges.131 Plaintiffs allege that FA Defendants had
the duty to ensure that any disbursement complied with 1031 Exchange regulations.132 This duty,
they aver, results from their knowledge of specific contractual provisions in the PSAs in addition
to knowledge about 1031 Exchanges generally and associated regulations and common practices
in the industry.133 These claims are not sufficiently dependent on the PSA terms to be considered
subject to Ohio’s equitable estoppel doctrine. Ohio courts require something close to a finding
that the arbitration-resisting party’s claims are contingent upon contractual terms,134 which is not
the case here.
2.

Intertwined Claims: Concerted Misconduct

FA Defendants next argue that the concerted misconduct estoppel theory applies. The
doctrine may be applied “where the signatory to the contract [containing the arbitration clause]
alleges substantially interdependent and concerted misconduct by both the non-signatory and one

“In many cases, the source of a Plaintiff’s investment was commercial real estate that had been held for many
years, which Plaintiff sought to exchange for income producing property in a like-kind exchange under Section 1031
of the Internal Revenue Code (a ‘1031 Exchange’).” Am. Compl. ¶ 1.
132
Am. Compl. ¶ 408(d).
133
“Parkin and First American knew that disbursing the escrow funds before the completion of construction would
not comply with applicable rules for 1031 Exchanges and would subject Plaintiffs to risk that their funds would be
misappropriated, diverted, or converted from the purpose of funding the completion of construction at the relevant
[property].” Id.
134
See Javorsky v. Javorsky, 81 N.E.3d 971, 75–76 (Ohio Ct. App. 2017) (holding that estoppel applied because
signatory-plaintiff’s claims were “essentially contingent” on the agreement, they did not arise “unless” the
contractual element of the claim succeeded).
131

21

or more of the signatories to the contract.” 135 The magistrate judge found that the doctrine did
not apply for two reasons. First, the Plaintiffs arguably did not allege “substantially
interdependent and concerted misconduct” because they raised independent claims against the
FA Defendants, who were not parties to the sales agreements.136 Second, the magistrate judge
found that the policy underlying the concerted misconduct estoppel inapplicable here.137 The
purpose of the doctrine “is to prevent ‘arbitration proceedings between the two signatories’ from
being ‘rendered meaningless,’ thereby thwarting ‘the federal policy in favor of arbitration.’”138
Because the signatories waived their arbitration rights, the agreement to arbitrate was already
“rendered meaningless” and the court should avoid applying the doctrine.139
FA Defendants only explicitly object to the magistrate judge’s first rationale.140 FA
Defendants assert that the doctrine should apply because Plaintiffs’ “Fourth, Sixth, Seventh,
Thirteenth, Fourteenth, and Fifteenth causes of action” allege “substantially interdependent and
concerted misconduct.”141 However, the magistrate judge herself acknowledged that “Plaintiffs
do raise allegations of concerted misconduct between the Rockwell parties and FA
Defendants.”142 She found that the concerted misconduct theory did not apply in light of the fact
that the signatories waived their arbitration rights and questioned whether the allegations were
sufficiently interdependent.

135

I Sports, 813 N.E.2d at 8.
Order 16.
137
Id.
138
Id. (quoting Grigson v. Creative Artists Agency, LLC, 210 F.3d 524, 527 (5th Cir. 2000).
139
Order 19.
140
Obj. 8.
141
Id.
142
Order at 16.
136

22

As an initial matter, it is noted that the concerted misconduct theory has not been adopted
by any Ohio Supreme Court decision. 143 This court, like any federal court, is “reticent to expand
state law without guidance from its highest court.”144 And “in predicting how a state’s highest
court would rule, federal courts must follow intermediate state court decisions, policies
underlying applicable legal principles, and the doctrinal trends indicated by these policies.”145
Only a few published Ohio appellate decisions reference the doctrine, let alone apply
it.146 Importantly, the leading case, I Sports v. IMG Worldwide, Inc., applies pre-Arthur Anderson
federal estoppel law, not Ohio contract law.147 In doing so, it followed a Second Circuit opinion
which held that a concerted misconduct claim requires that the estopped party assert “claims
which are integrally related to the contract containing the arbitration clause.” 148 Regardless, I
Sports held that the concerted misconduct doctrine did not apply because there were no
allegations that the nonsignatory parties were involved in concerted misconduct with a signatory
party.149

143

AtriCure, 12 F.4th at 530.
Taylor v. Phelan, 9 F.3d 882, 887 (10th Cir. 1993).
145
Id.
146
See I Sports, 813 N.E.2d at 599; Discovery Resources, Inc. v. Ernst & Young U.S. LLP, 62 N.E.3d 714, 721
(Ohio Ct. App. 2016); Fields v. Herrnstein Chrysler, Inc., 2013 WL 772822, at *7 (Ohio Ct. App. February 7, 2013)
(unpublished).
147
Id.
148
I Sports, 813 N.E.3d at 10 (quoting Thomson-CSF, S.A. v. Am. Arbitration. Assn., 64 F.3d 773, 780 (2nd Cir.
1995)). It should be noted that many of the cases I Sports and Thomson rely upon have been overruled. E.g. Sunkist
Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993) (overruled by Lawson v. Life of the South
Ins. Co., 648 F.3d 1166, 1170–77 (11th Cir. 2011) (“Many of this Court’s decisions involving the question of
whether a non-party can enforce an arbitration clause against a party have not made clear that the applicable state
law provides the rule of decision for that question. However, the Supreme Court’s 2009 decision in Carlisle, which
postdates all of those decisions of this Court, clarifies that state law governs that question, and to the extent any of
our earlier decisions indicate to the contrary, those indications are overruled or at least undermined to the point of
abrogation by Carlisle.”))).
149
I Sports, 813 N.E.3d at 9–10.
144

23

Another published Ohio case, Discovery Resources Inc. v. Ernst & Young U.S. LLP, is
inapposite. Unlike here, it involves a signatory seeking to bind a non-signatory to an arbitration
agreement.150 Other material differences distinguish the case further. In Discovery Resources, a
plaintiff-signatory asserted claims against a defendant-signatory and a defendant-nonsignatory,
alleging a conspiracy to put the plaintiff-signatory out of business.151 The defendant-signatory
and defendant-nonsignatory moved to compel arbitration, which was opposed by the plaintiffsignatory.152 The contract containing the arbitration agreement was a services agreement, and the
defendant-signatory’s denial of the plaintiff’s services under the contract was the central conflict
of the dispute.153 Without much explanation, the court held that because the plaintiff-signatory’s
central claim was that the defendants conspired with each other to put the plaintiff out of
business, the concerted misconduct theory applied.154 In so doing, it relied on a federal case that
applied pre-Arthur Anderson federal law, which held that “a signatory . . . may be estopped from
avoiding arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in
arbitration are intertwined with the underlying contract.”155
The issues that were compelled into arbitration in Discover Resources were more
integrally connected to the underlying contract than the dispute here. There, the conspiracy
turned on what was promised to the signatories in the contract. Here, the issues that FA
Defendants seek to arbitrate only partially deal with what is contained in the PSAs. It is

150

62 N.E.3d 714, 717 (Ohio Ct. App. 2016).
Id.
152
Id.
153
Id.
154
Id. at 721.
155
Id. (quoting Liedtke v. Frank, 437 F. Supp. 2d 696, 699 (N.D. Ohio 2006) (citing Javitch v. First Union
Securities, Inc. 315, F.3d 619, 629 (6th Cir. 2003))).
151

24

recognized that Plaintiffs assert a conspiracy claim against all Defendants, but the allegations
against the FA Defendants center on more than just the PSAs.156 Plaintiffs also rely on what is
contained in separate escrow agreements and the FA Defendants’ fiduciary duties in bringing
claims against them. Accordingly, the court finds that the alleged concerted misconduct is not
“integrally related to the contract containing the arbitration agreement.”157
Moreover, the magistrate judge was correct that the underlying legal principles of the
doctrine do not support its application here. First, as noted earlier, Ohio courts are clear that
“[a]rbitration agreements apply to nonsignatories only in rare circumstances.”158 “Accordingly,
when deciding motions to compel arbitration, the proper focus is whether the parties actually
agreed to arbitrate the issue, i.e., the scope of the arbitration clause, not the general policies of
the arbitration statutes.”159 Thus, the analysis centers on whether the parties agreed to the
dispute, not the general policy of favoring arbitration. The question of whether the parties
actually agreed to arbitrate is a state contract issue. Indeed, the Supreme Court held that in order
for a non-party to an arbitration agreement to have standing to compel arbitration, state contract
law must allow him to enforce the agreement.160 Because the alternative estoppel theories
Indeed, many of the Plaintiffs’ allegations involve the improper utilization of the 1031 Exchanges and the central
role the escrow account had in the investment scheme. The first paragraph of the complaint explains a common
feature of most of the Plaintiffs: they often were long-time holders of commercial real estate and were attracted to
the Rockwell investments to set up a 1031 Exchange in order to obtain “income producing property.” Am. Compl.
¶ 1. The purpose of the 1031 Exchanges was to “hold TIC investor money in escrow until it could be disbursed to
pay for land purchases or to reimburse the costs of completed construction” because 1031 Exchange money could
only “be used for completed construction.” Am. Compl. ¶ 3. In one of their claims for relief, Plaintiffs allege that
FA Defendants “agreed to receive escrow funds in connection with each . . . transaction, but to disburse those funds
to Rockwell without Plaintiff’s consent and contrary to the terms of the purchase agreements.” Am. Compl.
¶ 433(b). However, the conspiracy claim is only one of many claims asserted against various groups of defendants.
157
I Sports, 813 N.E.3d at 10 (quoting Thomson-CSF, S.A. v. Am. Arbitration. Assn., 64 F.3d 773, 780 (2nd Cir.
1995)).
158
I Sports, 813 N.E.2d at 8.
159
Taylor, 958 N.E.2d at 1203.
160
GE Energy Power Conversion France SAS, Corp v. Outokumpu Stainless USA, LLC, 590 U.S. __, 140 S.Ct.
1637, 1643 (2020). This undermines state Federal Arbitration Act (FAA) cases that rely on federal court decisions
156

25

originate from pre-Arthur Anderson federal law and have only been applied sparingly in two
intermediate Ohio courts, it is not clear to what extent the theories are supported by Ohio
contract law. Thus, this court seeks to avoid inappropriately expanding Ohio contract law by
applying alternative estoppel theories which have seldom been applied and then only in “rare
circumstances.”
B. Florida Law
Similarly, under Florida law “the doctrine of equitable estoppel . . . applies when a
signatory to a contract containing the arbitration clause raises allegations of substantially
interdependent and concerted misconduct by both a non-signatory and one or more of the
signatories to the agreement.”161 “In such circumstances . . . equitable estoppel will apply since
there exists ‘a relationship among the parties of a nature that justifies a conclusion that the party
which agreed to arbitrate with another entity should be estopped from denying an obligation to
arbitrate a similar dispute with the adversary which is not a party to the arbitration
agreement.’”162 Moreover, the doctrine relies on the same rationale: if a qualified non-party is
not allowed to enforce an arbitration agreement “‘the arbitration proceedings between the two

incorporating the federal interests of the FAA in determining who is bound by an arbitration agreement. Instead,
state contract law should dictate who is bound. And even in federal courts, the concerted misconduct estoppel theory
is “far from well-settled.” In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 192–93 (Texas 2007) (analyzing
federal circuit court decisions that applied the concerted-misconduct estoppel theory, finding that as of 2007, the
doctrine only appeared in ten reported opinions and the theory was only relied upon in determining the outcome of
two cases.). The leading Ohio appellate decision that describes the concerted misconduct theory, I Sports, relies
mainly on federal cases and only cites to one Ohio Supreme Court case, Gerig v. Kahn. Gerig held that a signatory
to a contract may enforce an arbitration provision against a nonsignatory seeking a declaration of the signatories’
rights and obligations under the contract. 769 N.E.2d 381, 385-86 (Ohio 2002).
161
Greene v. Johnson, 276 So. 3d 527, 531 (Fla. Dis. Ct. App. 2019) (citing Marcus v. Florida Bagels, LLC, 112 So.
3d 631, 633–34 (Fla. Dist. Ct. App. 2013).
162
Marcus, 112 So. 3d at 634 (quoting Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354, 359 (2nd Cir.
2008)).

26

signatories would be rendered meaningless and the federal policy in favor of arbitration
effectively thwarted.’”163
Intertwined claims equitable estoppel has been applied in Florida’s intermediate state
courts more often than in Ohio courts but, like Ohio, Florida’s highest court has not formally
adopted it.164 Regardless, if a party waives its right to compel arbitration through its participation
in litigation or by taking action inconsistent with that right, Florida courts decline to apply
estoppel to allow a nonsignatory to compel arbitration.165 Here, as already discussed, the
Rockwell Defendants waived their right to arbitration during bankruptcy court proceedings.166
Because the doctrine is rooted in ensuring that the arbitration between the signatories is not
rendered meaningless, a nonsignatory “may not avail himself ‘of [the] arbitration provision’ to
which he is ‘not a party by seizing upon an exception that has the primary purpose of preventing
the frustration of rights that has already occurred.’”167 Put differently, because the Rockwell
Defendants already waived their arbitration rights, the FA Defendants may not utilize an
exception that is centered on “preventing the frustration of rights” because that “frustration” has
already occurred.
VI.

Ohio Plaintiffs’ Notice of Arbitration Agreement
FA Defendants also contend that they can compel the Ohio plaintiffs to arbitration

because the FA Defendants’ title policies contain arbitration agreements.168 Each PSA required

163

Id. (quoting MS Dealer, 177 F.3d at 947).
See, e.g., id.; Greene, 276 So. 3d at 527.
165
Marcus v. Florida Bagels, LLC, 112 So. 3d 631, 634–35 (Fla. Dist. Ct. App. 2013).
166
Response to Mot. to Compel Arb. Ex. A, ECF No. 225, filed March 29, 2023.
167
Id. (quoting Ben-Yishay v. Mastercraft Dev., LLC, No. 08-14046-CIV, 2009 WL 6387928, at *6 (S.D. Fla. Dec.
14, 2009)).
168
Obj. 10–11.
164

27

Rockwell “to pay for an endorsement to the standard-coverage owner’s policy of title insurance
insuring Buyer in the amount of the Purchase Price.”169 The title policy requires that “[a]ll
arbitrable matters when the Amount of Insurance is $2,000,000 or less shall be arbitrated at the
option of either [First American] or the Insured.” All amounts in excess of that amount “shall be
arbitrated only when agreed to by both [First American] and the Insured.”170
The FA Defendants object to the magistrate judge’s finding that the Ohio Plaintiffs
cannot be bound by the agreement because they did not have notice of the policies.171 The
magistrate judge reasoned that because the Ohio Plaintiffs did not receive the title policies until
after closing they lacked adequate notice of the arbitration provision.172
Under Ohio law, the “[e]ssential elements of a contract include an offer, acceptance,
contractual capacity, consideration (the bargained for legal benefit and/or detriment), a
manifestation of mutual assent and legality of object and consideration.”173 “A meeting of the
minds as to the essential terms of the contract is a requirement to enforcing the contract.”174 The
usual rule is that a meeting of the minds can occur through constructive notice. “Constructive
notice has been defined generally as knowledge of ‘circumstances which ought to have excited
apprehension and inquiry in the mind of a prudent and reasonable man.’”175 Actual notice is not
required.

169

E.g., First Decl. Steven J. Nielsen 3, ¶ 4.
E.g., First Decl. Steven J. Nielsen Ex. 47 ¶ 14.
171
Obj. 11.
172
Order 28.
173
Minster Farmers Coop Exchange Co., Inc. v. Meyer, 884 N.E.2d 1056, 1062 (Ohio 2008).
174
Id. (citing Episcopal Retirement Homes, Inc. v. Ohio Dept. of Indus. Relations, 575 N.E.2d 124, 137 (Ohio 1991)).
175
Rudolph v. Wright Patt Credit Union, 175 N.E.3d 636, 649 (Ohio Ct. App. 2021) (quoting Varwig v. Railroad
Co., 44 N.E. 92, 94 (Ohio 1896).
170

28

However, Ohio recognizes context-specific rules in determining the validity of title
insurance contracts.176 In the absence of negotiations for special rules or conditions, such
insurance contracts “are presumed to have intended that the ensuring policy would include the
usual and customary provisions found in similar title insurance policies.”177 Thus, even if the
policy is delivered after closing, the parties often have constructive notice because it is presumed
that the usual and customary provisions would be included. “To the extent that it contains the
usual and customary terms, the policy is simply a reflection of the parties’ intent and a memorial
of their agreement.”178 Conversely, where a title policy contains deviations from usual and
customary terms, Ohio law requires delivery of a title policy prior to closing in order for
nonstandard terms to be binding.179
Because this is a title insurance contract dispute, the determination is dependent on
whether FA Defendants’ policies contained terms that were “usual and customary.” If the court
determines that they were, Plaintiffs would be bound by assent through constructive notice.180
The court turns to the FA Defendants’ objections to the magistrate judge’s finding that the
arbitration clauses were not usual and customary.

176

Henderson v. Lawyers Title Ins. Co., 843 N.E.2d 152, 156–157 (Ohio 2006).
Id. at 157.
178
Id.
179
Id.
180
FA Defendants ask that this court follow DiTucci v. Ashby because the facts are similar and even involve some of
the same parties. DiTucci, however, is a federal district court case that applied Indiana law, not Ohio law. DiTucci v.
Ashby, 2021 WL 778579 (D. Utah March 1, 2021). The decision does not analyze the usual and customary terms
doctrine, nor is it clear whether Indiana has even adopted the doctrine. The court respectfully declines to follow the
reasoning provided in the case.
177

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VII.

Whether Arbitration Provisions are Usual and Customary Terms of Title Policies
FA Defendants first object to the magistrate judge’s reliance on Henderson v. Lawyers

Title Insurance Company, the leading Ohio Supreme Court case on constructive notice and title
insurance contracts.181 They contend that the case was limited to “run-of-the-mill ‘residential real
estate transactions.’”182 Thus, they argue, because this case deals with “sophisticated tax and
commercial real estate transactions” and “sophisticated real estate investors,” Henderson should
not apply.183
Henderson involved a purchase and sale agreement for a home.184 Plaintiffs signed a
purchase and sale agreement, which provided that the title insurance premium be split between
the buyer and seller.185 The real estate broker provided the title insurance company a copy of the
contract and requested that a commitment for title insurance be issued to the plaintiffs.186 The
plaintiffs never received a copy of the commitment and only received their title policy after
closing.187 The court held that “a title insurance policy that is issued in response to an unqualified
request for coverage, but is not delivered to the insured until after the closing, is binding to the
extent that it contains the usual and customary terms found in similar policies.”188
Far from limiting the doctrine to sophisticated, commercial transactions, Henderson
instead ruled that for the usual and customary terms doctrine to apply, the parties must have

181

Obj. 12; see Henderson, 843 N.E.2d at 152.
Obj. 12 (quoting Henderson, 843 N.E.2d at 156).
183
Id.
184
Henderson, 843 N.E.2d at 265.
185
Id.
186
Id.
187
Id.
188
Id. at 268.
182

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contracted for a standard policy of title insurance.189 That is exactly what the parties contracted
for here: a “standard-coverage owner’s policy.”190 This is an “unqualified request for coverage,”
lacking requests for special terms or conditions.191 Moreover, it is the unique features of title
insurance policies that drove Henderson’s analysis, not the residential nature of the underlying
transaction or the experience of the parties.192 Indeed, the Ohio Supreme Court relied on amicus
briefing explaining that “[t]itle insurance coverage is provided for a continuing and indefinite
period of time in exchange for a one-time premium payment, without the need to renew the
policy. On the other hand, property and casualty insurance coverage is provided for a relatively
short specified policy period, subject to renewal for additional periods upon the agreement of the
insured and the insurer and the payment of additional premiums.”193 Because the conflict centers
on a contract for a standard title insurance policy, the court sees no reason why Henderson
should not apply here.
Second, FA Defendants raise procedural objections to the magistrate judge’s order. They
contend that the magistrate judge “failed to recognize the April 12, 2023 Declaration of Steven J.
Nielsen [ECF No. 227], which was the only evidence in the record addressing [the Henderson]
standard before the June 20, 2023 hearing.”194 They allege that instead of only considering the
April 12, 2023 Declaration, the magistrate judge allowed Plaintiffs to present new evidence and

189

Henderson, 843 N.E.2d at 157.
See, e.g., First Decl. Steven J. Nielsen Ex. 1 ¶ 4.
191
Henderson, 843 N.E.2d at 157.
192
See Henderson, 843 N.E.2d at 160.
193
Id.
194
Obj. 12–13.
190

31

struck FA Defendants’ rebuttal evidence. The new evidence presented was a “form 2021 ALTA
Owner’s Policy, and . . . an Owner’s Policy Comparison Chart.”195
The court reviews the procedural history leading up to the June 20, 2023 hearing. The
events which Plaintiffs aptly describe as the “briefing odyssey” began when Plaintiffs first
identified the “usual and customary terms” issue in their objection to FA Defendants’ Motion to
Compel.196 To support their argument, they offered supplementary evidence.197 FA Defendants
responded to these arguments in their reply briefing filed on April 12, 2023, 198 and similarly
filed a supplementary April 12, 2023 Declaration of Steven J. Nielsen.199 The same day,
however, FA Defendants filed an evidentiary objection to the Plaintiffs’ supplementary
evidence.200 Plaintiffs responded to the objection to their evidence on May 31, 2023.201 FA
Defendants then objected to Plaintiff’s response because Plaintiffs did not meet their deadline.202
These motions were all addressed during the June 20, 2023 hearing before the magistrate judge.
The Order explains what happened during and after the hearing.
As an initial matter, only the parties’ original arguments, evidence, and
briefing is considered in making this determination. At the June 20 hearing,
Plaintiffs submitted additional evidence in support of their position that arbitration
clauses are not usual and customary in the title policy industry. See Exs. Regarding
243 Motion Hearing, ECF No. 244. Because this evidence was presented for the
first time at the hearing, the FA Defendants were afforded an opportunity to
respond. See Minute Entry, ECF No. 243. But they were advised any response must
be in the vein of a response to a notice of supplemental authority. See DUCivR 71(c). The court did not invite new evidence. The FA Defendants ignored this
directive, instead submitting three supplemental filings, including new evidence in
195

ECF No. 244 Exs. 2 & 3.
Pls.’ Opp’n to Renewed Mot. to Compel Arb. 11–19, ECF No. 225, filed March 29, 2023.
197
Id. Ex. B.
198
Defs.’ Reply in Support of Renewed Mot. to Compel Arb. 8–9, ECF No. 226, filed April 12, 2023.
199
Second Decl. Steven J. Nielsen.
200
Obj. to Evid., ECF No. 228, filed April 12, 2023.
201
ECF No. 236.
202
ECF No. 239.
196

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the form of additional declarations.203 Without court authorization, Plaintiffs
responded in kind, submitting two supplemental filings with new declarations and
other new evidence from web sources.204 These supplemental filings were
unauthorized by the rules and far exceed the scope of the limited supplemental
briefing permitted by the court. Where this issue can be resolved on the parties’
initial briefing alone, and the submission of additional briefing and evidence was
unauthorized and unjustified, none of the additional evidence submitted at the
hearing or with the parties’ supplemental filings is considered.205
The court finds nothing objectionable here. The magistrate judge granted leave for
supplemental briefing responding to new legal authority. The court did not invite new
evidence.206 The parties failed to comply with her order. The magistrate judge did not err by not
considering briefings that were beyond the scope of the order. Moreover, the magistrate judge
explicitly stated that only the parties’ “original arguments, evidence, and briefing” was
considered in making her determination.207 In other words, she considered the April 12, 2023
Declaration and nothing filed thereafter.
FA Defendants further argue that even without the later briefings, the April 12, 2023
Declaration “indisputably established that arbitration provisions were usual and customary terms

See FA Defs.’ Suppl. Brief in Support of Renewed Mot. to Compel Arbitration, ECF No. 245, filed June 27,
2023; Third Decl. of Steven J. Nielsen in Support of Defs.’ Suppl. Brief and Mot. to Compel Arbitration, ECF No.
246, filed June 27, 2023; FA Defs.’ Resp. to Pls.’ Suppl. Mem. and Objection to Evidence, ECF No. 251, filed July
19, 2023; Fourth Decl. of Steven J. Nielsen in Support of FA Defs.’ Objection to Evidence, ECF No. 252, filed July
19, 2023; FA Defs’ Resp. to Pls.’ Obj. to Fourth Decl. of Steven J. Nielsen & Obj. to FA Defs.’ Resp., ECF No.
254, filed July 26, 2023.
204
See Pls.’ Suppl. Mem. & Obj. to Evid. in Opp’n to FA Defs.’ Mot. to Compel Arb., ECF No. 250, filed July 12,
2023; Pls.’ Obj. to Fourth Decl. of Steven J. Nielsen and Obj. to FA Defs.’ Resp., ECF No. 253, filed July 26, 2023.
205
In footnote 211 of the Order, the magistrate judge explained that “[g]enerally, parties ‘should be given an
opportunity to respond to new material,’ such as new evidence and legal arguments. Green v. New Mexico, 420 F.3d
1189, 1196 (10th Cir. 2005). However, if the court ‘does not rely on the new material in reaching its decision,’ it
may also decline to consider any response to the new material. Id.’”
206
Defendants argue that the magistrate judge may have granted leave to respond to “[a]nything that was raised at
the hearing.” Obj. 2–3 (quoting Tr. 12:8–18, ECF No. 261, filed October 13, 2023). However, the court’s minute
entry for the proceedings at the June 20, 2023 hearing explicitly states that “Defendant may submit five pages of
supplementary briefing.” ECF No. 243. Leave was not granted to file new evidence, even if there was some
ambiguity in the transcript due to “portions of the recording being inaudible or silent.” Tr. 2:18–19.
207
Order 48.
203

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in Ohio title policies during the years the TIC transactions occurred” and “[t]his undisputed
evidence was sufficient to compel arbitration.”208 FA Defendants contend that the magistrate
judge erred by making a factual finding that the arbitration clauses in the Ohio policies were not
usual and customary, contrary to what is suggested by the evidence presented in the April 12,
2023 Declaration. The court first reviews the usual and customary standard as explained in
Henderson and then turns to the April 12, 2023 Declaration.
In Henderson, the Ohio Supreme Court determined that an insurance company’s varying
inclusion of an arbitration clause “is hardly sufficient evidence of a usual and customary
practice.”209 Similar to FA Defendants’ argument, the defendant in Henderson argued that all
ALTA insurance policies included arbitration agreements “‘since at least 1987.’”210 However,
the court noted that the vice president of the company testified that “an arbitration clause appears
in the last three of the five form policies that were promulgated by ALTA and approved by the
Ohio Department of Insurance . . . [and] it was the practice of [the company] . . . to issue the
most recently approved ALTA policy when a customer made an unconditional request for an
owner’s policy of title insurance.”211 All five ALTA policies were available for purchase from
the title insurance company.212 A company representative stated that it was standard practice for
the company to issue the most recent ALTA policy (which contained an arbitration clause), but
other older versions that lacked an arbitration clause were also sold to customers. Thus, the

Obj. 13; id. at 14 (“It was clear error for her not to consider this [supplemental] evidence and deny the Motion.”);
Id. at 13 (“This undisputed evidence [referring to the April 12 Declaration] was sufficient to compel arbitration.”).
209
Henderson, 843 N.E.2d at 157–58.
210
Id. at 157.
211
Id.
212
Id.
208

34

evidence was not “that the more recent ALTA policies, which contain arbitration clauses, have
supplanted the previous policies.”213
Further, the title insurance issuer in Henderson argued that “usual and customary does
not imply unvarying use.”214 The court noted that “even a broadly construed definition of ‘usual
and customary’ . . . tolerates some degree of practical variation” but a title insurance company
still must establish some degree of “consistency and regularity in order to retain its essential
meaning.”215 The court determined that because the ALTA policies variably contained arbitration
clauses and because the company deleted arbitration clauses on request at no further cost, the
evidence presented was “hardly sufficient evidence of a usual and customary practice.”216
The court turns to whether FA Defendants met their burden in demonstrating that their
terms were the usual and customary practice. Because FA Defendants’ usual and customary
terms argument is necessary to determine the existence of an enforceable arbitration agreement,
FA Defendants must present “sufficient evidence to demonstrate the existence of an enforceable
agreement.”217 Plaintiffs, as the non-movants, are given the benefit of all reasonable doubts and
inferences that may arise.218 If the court determines that the FA Defendants’ met their initial
burden, the burden shifts to the Plaintiffs to “establish[] a genuine dispute as to whether the
arbitration provisions apply.”219 “This framework is similar to summary judgment practice.”220

213

Id.
Id. at 158.
215
Id.
216
Id. at 158.
217
BOSC, Inc. v. Bd. of Cnty. Comm’rs of Cnty. Of Bernalillo, 853 F.3d 1165, 1177 (10th Cir. 2017).
218
Hankcock v. American Tel. & Tel. Co., Inc., 701 F.3d 1248, 1261 (10th Cir. 2012).
219
Id.
220
Id.
214

35

In Defendants’ April 12, 2023 Declaration, Steven J. Nielsen asserts that because it has
been “the standard practice of all large title companies . . . to issue policies for commercial
property transactions based on the most recently approved ALTA Owner’s Policy” and because
the most recently approved ALTA policy contained an arbitration provision, the inclusion of an
arbitration provision was (and still is) the standard practice in the industry.221 Thus, “when First
American issued title policies that . . . included the arbitration provision just as ALTA had
promulgated it in 2006,” the arbitration provision included was the usual and customary practice
of the industry.222 Missing from the Declaration, however, are facts describing what the
arbitration clause in the 2006 ALTA Owner’s Policy provided.
Just because the 2006 ALTA Owner’s Policy includes “an arbitration clause” does not
mean that all arbitration clauses are usual and customary in the industry. For example, unlike
First American’s policies for the Ohio transactions, which allow for a unilateral demand for
arbitration, the policies First American issued for the Florida transactions provide that
“arbitration . . . may be demanded if agreed to by both the Company and the Insured at the time
of a controversy or claim.”223 As the magistrate judge explained, such an arbitration clause does
not add any additional rights beyond what would be permitted in its absence.224 Thus, because
one party can unilaterally avoid arbitration, the Florida agreements effectively contain no
arbitration agreement.225 The April 12, 2023 Declaration does not explain or provide what the

221

Second Decl. Steven J. Nielsen ¶ 5.
Id. ¶ 6.
223
First Nielsen Decl. 6 ¶ 14 (emphasis added), ECF No. 220.
224
Order 47.
225
Id.
222

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2006 ALTA Owner’s Policy’s arbitration clause entailed.226 Without that information, the court
cannot determine what the usual and customary terms are and whether the Ohio policies
conformed to those terms.227
First American’s provided insufficient evidence to demonstrate that their arbitration
clauses in the Ohio polices conformed to the usual and customary practice sufficient to give
Plaintiffs constructive notice of their existence.228

ORDER
FA Defendants’ Objections229 are OVERRULED and the magistrate judge’s Memorandum
and Order230 is adopted as set forth above. FA Defendants’ Renewed Motion to Compel
Arbitration231 is DENIED.

226

For example, it is not explained whether the ALTA arbitration clause provides for the same $2,000,000 limitation
in the Ohio policies.
227
The Declaration also does not explain why Mr. Nielsen would know the standard practices of all major title
insurance companies, as opposed to First American’s practices.
228
Additionally, while the court does not consider the substance of the additional competing declarations excluded
by the magistrate judge, the parties’ belated efforts to supplement the record with dueling declarations strongly
suggest that a decision to compel arbitration would require additional development of the evidentiary record.
229
ECF No. 263.
230
ECF No. 258.
231
ECF No. 219, filed March 3, 2023.

37

Signed May 8, 2024.
BY THE COURT

________________________________________
David Barlow
United States District Judge

38